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I'm still on the road today, so it seems like the perfect time to review the big picture for SPX. It's been over two months since we posted The Last Big Butterfly that reminded members of the last remaining large-scale harmonic pattern on the charts - also the biggest impediment to a continued rally.

Follow up:

Here's the same chart, updated for a couple of proposed rising channels that cover the 9 months since the October lows. Note that the index has gone essentially nowhere since that post.

The index has, however, dipped below the bottom of the white channel twice in the past month, a clear violation of a 6-year trend. This would normally be a very bearish development.

Yet, magically, SPX has popped back into the fold - seeming to ignore the bearish implications. Fortunately, our analog alerted us to the fact that these past 4 months - and 3 more to come - would be full of chop. Per the analog, it's all part of a rather clever plan to force SPX over 2138.

A peek at chart since 2007 shows the march from 666 has been unrelenting. But, it hasn't been without drama: notably the 17% correction in 2010 and the 21% correction in 2011 that were entirely predictable and highly profitable shorting opportunities.

Just as notably, 2013 and 2014 were without drama - unless we count the October 2014 meltdown that was instantly arrested by a timely Jim Bullard appearance on Bloomberg, suggesting that another round of QE might be in order.

This stick save, by the way, is in good company. Each and every time SPX was in danger of plunging through the channel bottom, there was a BOJ, FOMC, or ECB action that saved the day: either a QE event or a major currency move - usually involving the yen. Over the past several months, the saves have involved CL as well.

So, what are we to make of the dips below the long-term channel bottom? Should they matter? Will they derail the rally?

Yes, they should matter. And, no, they will not derail the rally. The only thing that truly matters at this point is whether or not the yen carry trade (or the other, lesser means of manipulation) remain in force. And, that, my friends, will depend on the Japanese.

Can they stomach another increase in QQE and an accompanying lower yen? We'll find out in two weeks, when USDJPY's SMA200 finally catches up with it as predicted by our March 27 analog.

Harmonic Patterns have clearly worked in the past. The reversals at the .618, .786 and .886 Fibs are solid evidence. The 1.272 was largely ignored through the coordinated actions of central bankers at YE2013. At least they acknowledged it after the fact, with a backtest (last October's dip.)

Will they successfully slice through 2138 - the last big harmonic pattern on the chart. TPTB have done a pretty good job so far. Dozens of busted chart patterns are a testament to their efforts. But, the biggest test comes on August 13, and again in mid-October.

Stay tuned.

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